Day 14: 3 Pillars Of Revenue
Intro
Starting a business can be very difficult for many people, but in reality, there are 3 things that need to be followed. The success of any business is explained and brought down to just 3 pillars of revenue by one of the best business growth advisor, Jay Abraham.
As mentioned in one of my previous posts (check it out here), any business that follows these 3 fundamental Pillars of Revenue, also known as the 3 Profit Activators, will make progress and grow successful.
What are the 3 Pillars of Revenue
How do you know your business is successful or not?
Simple…
If it’s generating profit, it is successful. If it’s not generating profit or not generating money, then some problems need to be handled.
The only ways to make money inside your business and make it grow are represented by the 3 pillars of revenue and they are
- Get more customers
- Do repeated business with those same customers
- Sell higher ticket products to increase revenue
Most of the time, businesses focus on getting more customers only. Well, it’s not bad because if you manage to bring in more customers, in a way, your total number of sales will increase. But the growth is only ‘Linear’.
What if you are not able to provide repeated sales or no interesting high-value products or services to your customers? Some of your customers can leave you for another business.
Let’s have a look an example.
Example
A particular business has 200 customers. Let’s assume that each customer buys products for a value of $100, twice a year.
So,
number of customer = 200
Repeated business = 2
Value of product sold = 100
If we calculate the Annual Revenue (or Turnover), we will get
= 200 * 2 * 100
= $ 40,000
Part 1
What will happen if we increase any one of the 3 factors responsible for increasing the revenue of a business by 10%?
a) Number of customer by 10%
220 * 2 * 100 = $ 44,000
b) Repeated business by 10%
200 * 2.2 * 100 = $ 44,000
c) Value of product sold by 10 %
200 * 2 * 110 = $ 44,000
The Annual Revenue is $ 44,000 for any factor out of the 3 factors that are increased by 10%.
Therefore the increase in sales is calculated by;
\frac{New Sales - Initial Sales}{Initial Sales} * 100= \frac{44000 - 40000}{40000} * 100
= 10 %
Part 2
What will happen if we now process on increasing any two of the 3 factors responsible for increasing the revenue of a business by 10% each?
a) Number of customer and Repeated business, increased by 10% each
220 * 2.2 * 100 = $ 48,400
b) Number of customer and Value of product, increased by 10% each
220 * 2 * 110 = $ 48,400
c) Repeated business and Value of product, increased by 10% each
200 * 2.2 * 110 = $48,400
The Annual Revenue is $ 48,400 for any 2 factors out of the 3 factors that are increased by 10%.
Therefore the increase in sales is calculated by;
\frac{New Sales - Initial Sales}{Initial Sales} * 100= \frac{48400 - 40000}{40000} * 100
= 21 %
Part 3
What will happen now if we increase all 3 factors responsible for increasing the revenue of a business by 10 % each?
220 * 2.2 * 110 = $ 53,240
For all the 3 factors that are increased by 10%, the Annual Revenue is $ 53,240
Therefore the increase in sales is calculated by;
\frac{New Sales - Initial Sales}{Initial Sales} * 100= \frac{53240 - 40000}{40000} * 100
= 33.1 %
Results Explanation
| Part # | Number of Business Factors increased by 10 % | % increase in Annual Return | Surplus % | Type of graph |
|---|---|---|---|---|
| 1 | 1 | 10 | 0 | Linear |
| 2 | 2 | 21 | 1 | Exponential |
| 3 | 3 | 33.1 | 3.1 | Exponential (steeper) |
When only one of the three factors is optimised, the annual revenue growth is linear. However, as you start you optimise 2 factors, the growth is no more linear but exponential. When all 3 factors (the 3 pillars of revenue) are now optimised, the growth exhibits a steeper exponential growth.
This extra 3.1% can further be raised if all the business resources are used efficiently and this is what Jay Abraham calls the power of leverage.
A full explanation can be watched by Jay Abraham himself
Final Notes
From the example given above, it can be noted how important and how the 3 pillars of revenue affect the growth of a business.
A list of businesses that follow the 3 pillars of revenue is given below.
| Get More Customers | Do Repeated Business with Those Customer | Sell High Ticket Products to Increase Revenue | |
|---|---|---|---|
| 9 - 5 Job | NO | NO | NO |
| Real State Flipping | YES | NO | YES |
| Brick and Mortar Business | YES | YES | NO |
| E-Commerse like Shopify and Amazon | YES | YES | NO |
| MLM | YES | YES | NO |
| Low Ticket Products Affiliate Marketing | YES | YES | NO |
| High Ticket Products Affiliate Marketing | YES | YES | YES |
| Digital Products | YES | YES | YES |
| Coaching and Consulting | YES | YES | YES |
| Events and Mastermind | YES | YES | YES |
If you want to learn more about how to set up, grow and scale the businesses that follow the 3 pillars of revenue, please do follow my number one recommendation by clicking here.
Another platform that guides people to have their own business is no other than Click Funnels, do attend the web class for more information.
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